Ian Cobbold and Gavin Lawrie Presented at PMA Conference, Boston, USA, May 2002
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Abstract The Balanced Scorecard is a widely adopted performance management framework first described in the early 1990s. More recently it has been proposed as the basis for a ‘strategic management system’. This paper describes its evolution, recognising three distinct generations of Balanced Scorecard design. The paper relates the empirically driven developments in Balanced Scorecard thinking with literature concerning strategic management within organisations. It concludes that developments to date have been worthwhile, highlights potential areas for further refinement, and sets out some possible topics for future research into the field. The Balanced Scorecard and its development The Balanced Scorecard was first introduced in the early 1990s through the work of Robert Kaplan and David Norton of the Harvard Business School. Since then, the concept has become well known and its various forms widely adopted across the world (Rigby, 2001). By combining financial measures and non-financial measures in a single report, the Balanced Scorecard aims to provide managers with richer and more relevant information about activities they are managing than is provided by financial measures alone. To aid clarity and utility, Kaplan and Norton proposed that the number of measures on a Balanced Scorecard should also be constrained in number, and clustered into four groups (Kaplan and Norton, 1992, 1993). Beyond this, the original definition of Balanced Scorecard was sparse. But from the outset it was clear that the selection of measures, both in terms of filtering (organisations typically had access to many more measures than were needed to populate the Balanced Scorecard) and clustering (deciding which measures should appear in which perspectives) would be a key activity. Kaplan and Norton proposed that measure selection should focus on information relevant to the implementation of strategic plans, and that simple attitudinal questions be used to help determine the appropriate allocation of measures to perspectives (Kaplan and Norton, 1992). In essence the Balanced Scorecard has remained unchanged since these early papers, having at its core a limited number of measures clustered into groups, and an underlying strategic focus. But modern Balanced Scorecard designs also have a number of features that clearly differentiate them from earlier examples. This paper describes these changes as an evolution through three distinct ‘generations’ of Balanced Scorecard design. 1st Generation Balanced Scorecard Balanced Scorecard was initially described as a simple, “4 box” approach to performance measurement (Kaplan and Norton, 1992). In addition to financial measures, managers were encouraged to look at...